Press Metal expected to post weaker smelting margins in the second half of 2026

Traders Union
All News
Business & Wealth
Companies
Press Metal margins weaken in 2026

Highlights

HLIB Research expects Press Metal’s smelting margins to weaken in 2H26, with third-quarter earnings of RM600–RM650 million, down 10%–17% quarter-on-quarter.
The LME aluminium spot price fell to US$3,228 per metric tonne in the third quarter of 2026, while FY26, FY27 and FY28 earnings forecasts were cut by 2%, 10% and 6%, respectively.
Indonesia’s capacity is set to rise from 2mtpa in 2026 to more than 3mtpa in 2027, increasing the risk of oversupply and limiting Press Metal’s re-rating potential.

This article was translated from the original. Read the original version by our correspondent here.

Earnings forecasts and target price revision

As reported by The Edge Malaysia, citing Hong Leong Investment Bank Research, Press Metal is expected to post sequentially weaker smelting margins in the second half of 2026 as the aluminium market shifts from tight supply towards a potential surplus in 2027.

The research firm estimates the company’s core earnings for the third quarter of 2026 at RM600 million to RM650 million, down 10% to 17% quarter-on-quarter but up 1% to 9% year-on-year. This would bring nine-month earnings to about 75% to 77% of its full-year forecast.

The sequential decline is driven by a lower average London Metal Exchange aluminium spot price of US$3,228 per metric tonne, compared with US$3,564 in the second quarter of 2026, alongside a rise in the average alumina spot price. Following lower MJP premium assumptions and higher alumina and carbon anode costs, HLIB Research cut its earnings forecasts for financial years 2026, 2027 and 2028 by 2%, 10% and 6%, respectively.

The firm maintained its "hold" recommendation on Press Metal, with a lower target price of RM7.44, compared with RM8.22 previously.

Global supply recovers as cost pressures intensify

The easing of global supply is supported by the gradual resumption of smelting operations in the Gulf, including the earlier-than-scheduled restart of Emirates Global Aluminium’s Al Taweelah plant, as well as increased exports from China and Indonesia.

HLIB Research also noted that Indonesia’s nameplate capacity is expected to increase from 2mtpa in 2026 to more than 3mtpa by 2027. This further strengthens the view that the market could shift into surplus next year.

At the same time, cost pressures are intensifying. Alumina prices have risen since mid-October following a recovery in downstream demand from the Middle East, while carbon anode prices have reached a multi-year high of CNY6,000 per metric tonne amid high petroleum coke and coal-tar pitch costs. The MJP premium, meanwhile, has fallen sharply since late September.

Although HLIB Research remains constructive on the company’s fundamentals, it believes the external environment is becoming increasingly unfavourable. The firm also said the lack of near-term earnings catalysts could limit the stock’s re-rating potential.

In our previous coverage of the proposed “user-pays” electricity pricing for large users such as data centres and energy-intensive industries, we discussed the government’s rationale for distributing supply costs more fairly while curbing increases in household bills. The article also outlined factors weighing on generation costs and tariff adjustment mechanisms, including incentives to switch to time-of-use tariffs to manage demand.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.